By Paul Demko | politico.com
Federal regulators on Monday have approved health insurer Cigna’s $52 billion acquisition of drug benefits manager Express Scripts, a mega deal that’s the latest evidence of health care giants bulking up, the companies said in an announcement Monday.
The combination represents a major reshuffling of the health care industry as companies try to constrain costs and gird for the long-expected entrance of Amazon into the sector.
The Justice Department reportedly is also close to approving CVS Health’s blockbuster acquisition of Aetna, which would create one of the country’s biggest health care companies.
The looming approval of the deals comes two years after Obama administration regulators blocked a major proposed consolidation in the health insurance industry over concerns about diminished competition. DOJ successfully sued in 2016 to halt Anthem’s proposed acquisition of Cigna and Aetna’s merger with Humana.
By contrast, the Cigna-Express Scripts deal was expected to be approved with few strings attached. The companies had combined revenues of nearly $150 billion last year. Express Scripts was the last major standalone pharmacy benefit manager — a health care middleman that administers drug benefits for public and private insurers.
The Justice Department concluded that the merger wouldn’t harm competition in either the insurance or PBM markets. The agency’s antitrust division said it reviewed more than 2 million documents and interviewed more than 100 industry sources in reaching that conclusion.
“Quality health care and competitive pricing for health care services and pharmaceutical drugs is critical to U.S. consumers,” said Makan Delrahim, the head of the antitrust division, in a statement announcing approval of the deal.
“We are pleased that the Department of Justice has cleared our transaction and that we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company,” said David Cordani, CEO of Cigna, in a statement.
The PBM industry has come under heightened scrutiny for its role in influencing drug prices, facing questions about whether the companies profit too much from rebates passed on by drugmakers. The Trump administration has been critical of PBMs as it works to bring down drug prices.
The merger hit a bump in August when activist investor Carl Icahn, who owns a sizable share in Cigna, blasted the deal and sought to block it. But Cigna never wavered in its support for the acquisition, and Icahn quickly backed down.
Cigna’s stock plunged by about 15 percent shortly after the deal was announced in March, but has since bounced back. Express Scripts’ stock has jumped by about 20 percent since the acquisition became public.
Cordani will head the combined company. Tim Wentworth, Express Scripts CEO, will remain president of the PBM.
The deal is expected to be completed by the end of the year.